Search

No service tax on licence fee for liquor sold in retail: Delhi HC

Team registrationADVISER
Aug 17, 2018
2 min read

Citing a GST Council decision, the Delhi High Court disposed off a writ petition filed by leading liquor companies challenging imposition of service tax on licence and application fee for liquor sold in retail.

The court noted that the GST Council meeting on March 10, 2018 had already decided to not levy service tax/GST on such fee and even the central government had agreed to the council’s decision.

The tax department had sent show cause notices to the liquor companies seeking service tax/GST.

The matter related to licence and application fee for alcoholic liquor for retail consumption only.

Justice S Ravindra Bhat and Justice AK Chawla delivered the judgement

The judges have kept the matter in the call book (record of matters to be decided at a later stage). The call book cases can be reviewed at a later date.

The tax experts point out that this ruling could also have an impact on some of the other industries where government charges a license fee.

“While this ruling and the internal circular, in specific addresses taxability of license/application fee paid by the liquor industry, it could have larger ramifications on various industries where similar fees is paid and an argument of non-levy of service tax/GST may be explored,” said Experts.

Going ahead, even fees charged for telecom, mining, oil & gas licenses could also come under the purview of GST and so can fees for passport, visa and driving licence. “To tax the statutory or sovereign functions of the government will raise issues in a plethora of activities where the government seeks a charge,” said Experts.

Experts feel the big question is to determine whether licence fees charged by the government is a charge for carrying out the sovereign function of the state, and if at all this can be taxed. “The problem is that there is an absence of service element in this arrangement,” said Experts.

In a similar case, a gaming company had filed a writ petition in Mumbai High Court challenging the circular that provides for taxability of the government services .